Opinion
CASE NO. 3:02-CV-1279-M
December 20, 2002
MEMORANDUM OPINION AND ORDER
Before the Court is Defendants' Motion to Dismiss and/or Stay Plaintiff's Amended Complaint and Request for Declaratory Judgment. Upon consideration of the briefs submitted by the parties and the law applicable to the issues before the Court, the Court is of the opinion that Defendants' Motion to Dismiss and/or Stay should be GRANTED in part and DENIED in part.
FACTUAL PREDICATE
Plaintiff provides liability insurance coverage to the Defendants through a policy (the "Policy") issued to Defendants in connection with their operation of nursing homes in Texas. Defendants were sued in an underlying lawsuit for negligence and abuse in the care of an elderly patient. Plaintiff provided a defense in that lawsuit subject to a full reservation of rights. Defendants were found negligent and to have acted with malice, and the court entered judgment against them for compensatory and punitive damages.
Guadalupe Rivera v. Brentwood Place Three, No. 00-6777-E (101st Dist. Ct., Dallas County, Tex.). After a jury trial, the jury returned its verdict finding the Defendants negligent and awarding $100,000 for medical expenses, $200,000 for pain and suffering and $2,000,000 in exemplary damages. At the time this suit was filed, no judgment had yet been entered on the jury's verdict. At the time Plaintiff filed its Amended Complaint, final judgment in the underlying suit had been entered. Medical expenses were reduced to $83,255.29, and punitive damages were entered in the amount of $366,510.58.
Plaintiffs Original Complaint in this matter, filed on June 19, 2002, sought a declaration that the Policy did not provide coverage for punitive damages, and that, in any case, Texas public policy prohibits the insurance of punitive damages. After receiving notice of Plaintiff's declaratory judgment action in this Court, Defendants added Plaintiff as a Defendant in a previously filed insurance coverage lawsuit (the "Texas Action") pending in Gregg County, Texas, the county of Defendants' residence. In the Texas Action, Defendants asserted a breach of contract claim against Plaintiff, alleging that Plaintiff failed to pay amounts due under the Policy in connection with underlying lawsuits. Defendants then filed a motion in this Court, requesting the Court to dismiss or stay Plaintiff's federal action, in deference to the Texas Action.
Stebbins Five Companies Ltd. v. Underwriters at Lloyd's London, No. 2002-1328-B (124th Dist. Ct., Gregg County, Tex.).
On October 2, 2002, Plaintiff amended its Complaint to add a breach of contract claim against Defendants, asserting that Defendants breached the Policy's cooperation clause during the defense of the underlying lawsuit. Defendants then filed another Motion, asking the Court to dismiss and/or stay Plaintiff's declaratory judgment action and to dismiss Plaintiff's breach of contract claim for failure to state a claim upon which relief can be granted.
The first issue the Court must resolve is whether Plaintiff's breach of contract claim states a claim upon which relief can be granted. If it does, then the Court is bound to exercise its jurisdiction unless extraordinary circumstances warrant abstention. If it does not, then the Court may exercise its discretion as to whether or not to hear Plaintiff's declaratory judgment action.
A. Declaratory Judgment Act
The Declaratory Judgment Act (the "Act") grants federal courts the power to declare rights. 28 U.S.C. § 2201(a). The Act states that any federal court "may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought." Id. (emphasis added). By its express language, the Act confers discretionary authority upon federal courts in the exercise of jurisdiction over declaratory judgment actions.
B. Abstention in the Context of a Declaratory Judgment Action
The proper analysis for determining whether a court should stay or dismiss a declaratory judgment action in deference to a parallel state proceeding has developed through a line of Supreme Court cases. The first case to address the issue was Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491 (1942). In Brillhart, the Supreme Court held that "district courts possess discretion in determining whether and when to entertain an action under the Declaratory Judgment Act, even when the suit otherwise satisfies subject matter jurisdictional prerequisites." Wilton v. Seven Falls Co., 515 U.S. 277, 282 (1995). In Brillhart, an underwriter filed a declaratory judgment action in federal court to determine that its policies did not cover the liability of its insured. 316 U.S. at 492. The insured moved to dismiss the federal suit on the ground that the issues involved could be settled in a garnishment proceeding pending in state court. The district court dismissed the federal suit, but the court of appeals reversed.
In considering the proper standard a district court should apply to decide whether to stay or dismiss, the Brillhart Court emphasized the discretionary nature of the authority granted by the Declaratory Judgment Act.
Although the District Court had jurisdiction of the suit under the Federal Declaratory Judgments Act, 28 U.S.C.A. s 400 [ 28 U.S.C. § 2201], it was under no compulsion to exercise that jurisdiction. . . . Ordinarily it would be uneconomical as well as vexatious for a federal court to proceed in a declaratory judgment suit where another suit is pending in a state court presenting the same issues, not governed by federal law, between the same parties.
Id. at 494-95. The Court held that the district court should consider whether those questions in controversy which are not foreclosed under the applicable substantive law can be better resolved in the state court proceeding. Id. In making this determination, a district court should examine the "scope of the pending state court proceeding and the nature of defenses open there," whether the claims of all interested parties can be adjudicated there, whether necessary parties have been joined, and whether such parties are amenable to process. Id.
Several decades after Brillhart was decided, Colorado River muddied the waters on this issue. Colorado River Water Conservation District v. United States, 424 U.S. 800 (1976). In Colorado River, the federal government sought a declaration of its water rights in certain rivers and tributaries in Colorado. The district court dismissed the action, in deference to a pending state proceeding, but the circuit court reversed, holding that abstention was inappropriate. Id. at 800.
The Supreme Court acknowledged the general rule that "the pendency of an action in the state court is no bar to proceedings concerning the same matter in the Federal court having jurisdiction. . . ." Id. at 817 (quoting McClellan v. Carland, 217 U.S. 268 (1910)). Without discussing BrillhART, the Court began by emphasizing the "virtually unflagging obligation of the federal courts to exercise the jurisdiction given them." Id. The Court discussed the recognized types of abstention, and concluded that the case before it fit into none of them. However, it recognized that principles of "(w)ise judicial administration, giving regard to conservation of judicial resources and comprehensive disposition of litigation" govern in situations involving concurrent jurisdiction. Id. Given these considerations, "the circumstances permitting the dismissal of a federal suit due to the presence of a concurrent state proceeding for reasons of wise judicial administration are considerably more limited than the circumstances appropriate for abstention." Id. at 818. In determining whether dismissal or stay is proper in cases of concurrent jurisdiction, it directed district courts to consider several factors: (1) whether there is assumption by either court over a res; (2) the inconvenience of the federal forum; (3) the desire to avoid piecemeal litigation; and (4) the order in which jurisdiction was obtained by the concurrent forums. Id. Under these considerations, "[o]nly the clearest of justifications will warrant dismissal." This analysis has become known as the "exceptional circumstances" test. In Colorado River, the Court found such exceptional circumstances in the clear federal policy against piecemeal litigation involving water rights, the existence of a complex state structure for resolving such issues, the absence of any progress in the federal court, the significant distance between the district court and the water district at issue, and the prior participation of the government in similar state proceedings. Id. at 820. It reinstated the district court's decision to abstain. Id. at 821.
Two years later, the Supreme Court revived the Brillhart analysis in Will v. Calvert Fire Insurance Co., 437 U.S. 655 (1978). In Will, the court of appeals granted a writ of mandamus ordering the district judge to adjudicate a Rule 10b-5 securities fraud claim, despite the pendency of a substantially identical state proceeding between the same parties. Although Will was not a declaratory judgment action, the Supreme Court found the Brillhart analysis appropriate. The Court concluded that "the [abstention] decision is largely committed to the `carefully considered judgment' of the district court." Id. at 663 (quoting Colorado River, 424 U.S. at 818). The Court acknowledged the "unflagging obligation" of federal courts to exercise their jurisdiction, as recognized in Colorado River, but noted that "it in no way undermines the conclusion of Brilihart that the decision whether to defer to the concurrent jurisdiction of a state court is, in the last analysis, a matter committed to the district court's discretion." Id. at 664. Four Justices dissented, contending that the "exceptional circumstances" test set forth in Colorado River applied under these facts. Id. at 669.
The plurality's suggestion in Will that the Brillhart analysis applies in circumstances other than declaratory judgment actions was negated in Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1 (1983). Moses H. Cone was a suit to compel arbitration. The Court held that the "exceptional circumstances" test established by Colorado River, rather than the discretionary Brillhart test, applied to the district court's decision to stay the suit to compel arbitration, in favor of a pending state suit. The district court had granted a stay pending disposition of the concurrent state action. The court of appeals reversed.
The Supreme Court concluded that the "exceptional circumstances" test established in Colorado River was not undermined or changed by its holding in Will. Id. at 935-37. It determined that, although a district court has discretion in deciding whether to stay a suit in instances of concurrent jurisdiction, "such discretion must be exercised under the relevant standard prescribed by this Court. In this case, the relevant standard is Colorado River's exceptional-circumstances test . . ." Id. at 938. The Court reiterated the nonexclusive considerations relevant to the existence of such circumstances, including the assumption by either forum over a res, the relative convenience of the fora, the extent to which federal law provides the rules of decision on the merits, and the adequacy of the state proceedings. Id. at 939-42.
Abstention in the context of a declaratory judgment action was revisited in Wilton v. Seven Falls Co., 515 U.S. 277 (1995). In Wilton, the Plaintiff underwriters refused to defend or indemnify the insured Defendants in an underlying lawsuit. After a verdict was rendered against Defendants in the underlying lawsuit, Defendants informed Plaintiff's that Defendants intended to file suit on the policies in state court. Id. at 277. Plaintiffs then sued in federal court, seeking a declaratory judgment that the policies did not cover Defendants' liability. Defendants filed suit in state court and moved to dismiss or stay the federal suit. The district court stayed the federal suit on the grounds that the state suit encompassed the same issues, and the court of appeals affirmed. Id.
On appeal, Plaintiff's argued that the Brillhart analysis was outdated and undermined by Colorado River and Moses H. Cone, and that the court should apply the "exceptional circumstances" test. The issue before the Supreme Court was whether the discretionary standard developed in Brillhart or the "exceptional circumstances" test set forth in Colorado River and Moses H. Cone applied in a district court's determination of whether to stay a declaratory judgment action during the pendency of a parallel state court proceeding, and what standard of review an appellate court should apply to that decision. Id. at 279. After reviewing Brillhart and its progeny, the Court noted in Wilton that " Brillhart, without more, clearly supports the District Court's decision in this case." Id. at 283. However, in response to Defendant's argument that intervening case law supplanted the broad discretion found in Brillhart, the Court pointed out that neither Colorado River nor Moses H. Cone dealt with actions brought under the Declaratory Judgment Act. Id. at 286. The Court emphasized the discretionary nature of the declaratory power conferred by the Act. "District features of the Declaratory Judgment Act, we believe, justify a standard vesting district courts with greater discretion in declaratory judgment actions than that permitted under the `exceptional circumstances' test. . . . No subsequent case, in our view, has called into question the application of the Brillhart standard to the Brillhart facts." Id. The Court, therefore, held that, in the declaratory judgment context, the discretionary Brillhart analysis applies to a district court's decision to stay or dismiss an action in deference to a parallel state proceeding.
The most recent contribution to this analysis is Diamond Offshore Co. v. A B Builders, Inc., 302 F.3d 531 (5th Cir. 2002). Diamond distinguishes between cases that seek only declaratory relief and declaratory judgment actions that include requests for monetary relief, and then clarifies the abstention analyses that should apply to each. In Diamond, Plaintiff sued in federal court seeking a declaratory judgment and damages for breach of contract. Id. at 537. The district court granted Plaintiff's motion for partial summary judgment and entered a final decree dismissing the case without retaining jurisdiction over Plaintiff's claim for damages. Id. On appeal, Plaintiff challenged the district court's refusal to consider awarding damages for its breach of contract claim.
The Fifth Circuit began by stressing the "exceptional circumstances" test for abstention, reiterating that "[t]he federal courts have a `virtually unflagging obligation' to exercise the jurisdiction conferred upon them." Id. at 538. Under the "exceptional circumstances" test, the court determined that abstention was improper. In the Fifth Circuit's view, the district court's justifications, which included a heavy trial docket, the preclusive effect of its declaratory judgment, the potential for Plaintiff to incur further damages in the state action, and its determination that the state action provided an adequate alternative forum did not rise to the level of those exceptional circumstances which justify abstention. Id. at 539. Defendant maintained that abstention was proper because the district court correctly characterized the case as a pure declaratory judgment action. The Fifth Circuit acknowledged that the discretionary Brillhart analysis is still valid with respect to pure declaratory judgment actions. Id. However, the district court had acknowledged that Plaintiff requested "a judgment for damages," and its characterization of the suit as one for purely declaratory judgment was therefore erroneous as a matter of law. Id. The Court held that "[i]nclusion of this request for monetary relief removes this suit from the realm of a declaratory judgment action." Id. Because Plaintiff's action sought more than a declaratory judgment, the district court was bound by its "virtually unflagging obligation" to exercise jurisdiction, and dismissal of Plaintiff's breach of contract action was thus improper. Id. at 540.
A review of these cases leads the Court to conclude that if Plaintiff has stated a valid claim for breach of contract, the "exceptional circumstances" test applies, and the Court should retain jurisdiction. If, however, Plaintiff's breach of contract claim fails to state a claim upon which relief can be granted, then the Court has discretion as to whether to exercise its jurisdiction or defer to the Texas Action.
STANDARD OF REVIEW
When considering a motion to dismiss under Fed.R.Civ.P. 12(b)(6), the Court accepts as true all well-pleaded allegations in the complaint and views them in the light most favorable to Plaintiff. Malina v. Gonzales, 994 F.2d 1121, 1125 (5th Cir. 1993). However, conclusory allegations or legal conclusions set forth as factual conclusions will not prevent dismissal. Fernandez-Montes v. Allied Pilots Ass'n, 987 F.2d 278, 284 (5th Cir. 1993). A motion to dismiss should be granted only when it appears without doubt that Plaintiff can prove no set of facts in support of its claims that would entitle it to relief. Conley v. Gibson, 355 U.S. 41, 45-46 (1957); Home Capital Collateral, Inc. v. FDIC, 96 F.3d 760, 764 (5th Cir. 1996). Dismissal for failure to state a claim upon which relief can be granted is generally disfavored; it is appropriate only in rare circumstances. Mahone v. Addicks Utility District of Harris County, 836 F.2d 921, 926 (5th Cir. 1988).
ANALYSIS
I. Breach of Contract Action
Plaintiffs breach of contract claim is based upon Defendants' alleged assertions of malpractice against the counsel Plaintiff assigned to represent Defendants in the underlying lawsuit.
Plaintiff alleges that as a result of Defendants' conduct, the assigned counsel was forced to withdraw from seven lawsuits, and Plaintiff incurred excess costs in obtaining new counsel to defend Defendants. Plaintiff contends such conduct constitutes a breach of the Policy's cooperation clause, which requires Defendants to "[c]ooperate with us in the investigation or settlement of the claim or defense against the `suit'. . . ."
A. Proper Relief for Breach of Cooperation Clause
Defendants contend that a cooperation clause constitutes a condition precedent which an insured must satisfy to be entitled to coverage under a policy; therefore, its breach does not give an insurer an affirmative cause of action against its insured. Plaintiff, on the other hand, asserts that the obligation to cooperate pursuant to the Policy is a promise rather than a condition precedent, and that an insured's failure to cooperate can give rise to a cause of action for damages.
It is well established under Texas law that an insured's breach of a cooperation provision relieves an insurer of liability on the policy. Filley v. Ohio Casualty Insurance Co., 805 S.W.2d 844, 847 (Tex.App. — Corpus Christi 1991, writ denied). Basic authorities define a cooperation clause as:
See also Universal Auto. Ins. Co. v. Culberson, 54 S.W.2d 1061, 1062 (Tex.Civ.App.-Waco 1932), aff'd, 126 Tex. 282 (1935), overruled on other grounds, 464 S.W.2d 91 (Tex. 1971) (holding that an insured's failure to cooperate according to the policy relieves an insurer of liability, but that failure is a question of fact for the jury); Employers Liab. Assurance Corp. v. Mosley, 460 S.W.2d 201, 203 (Tex.Civ.App.-Houston [14th Dist.] 1970, no writ) (holding that an automobile insurer may be relieved of liability by a insured's breach of a cooperation clause, although the determination of breach is one of fact); Grffin v. Fid. Cas. Co. of N.Y, 273 F.2d 45, 48 (5th Cir. 1959) (applying Texas law, and holding that, in order to be relieved from liability under an insurance policy, an insurer must show that it was actually prejudiced by an insured's breach of a cooperation clause); Frazier v. Glens Falls Indem. Co., 278 S.W.2d 388, 392 (Tex.Civ.App. — Fort Worth 1955, writ ref'd n.r.e.) (holding that although the determination of whether an insured has breached the duty to cooperate is usually a fact question, circumstances are possible which would justify resolving the question as a matter of law, but the insurer must always demonstrate actual prejudice); Quorum Health Res. v. Maverick County Hosp. Dist., 308-F.3d 451, 469-71 (5th Cir. 2002).
a condition precedent to liability under the contract, or as a condition subsequent which may operate as a defeasance of a liability which has already attached. Such a provision is a material part of the policy; and a breach of the provision by the insured, in a material respect, constitutes a defense to liability on the policy, in the absence of a waiver by or estoppel of the insurer.
44 Am. Jur.2d Insurance § 1430 (1982). Breach of cooperation provisions in insurance policies arise in a discrete context in Texas case law: when an insurer seeks to avoid liability by claiming that its insured has breached a condition of the policy, notably not where an insurer is suing its insured for breach of contract. The Court has found no case in which an insurer bases a breach of contract action upon an insured's breach of a cooperation clause, nor have either of the parties presented the Court with such a case. Plaintiff concedes this lack of authority, but explains that most breaches of cooperation clauses do not give rise to quantifiable monetary damages. Plaintiff insists that Defendants' characterization of the cooperation clause as a "condition precedent" is unwarranted, and that it is better understood in the context of a "promise," which Defendants broke. Therefore, Plaintiff asserts that its breach of contract claim is analogous to an insurer suing its insured to recover premium payments. Ample case law supports the proposition that an insurer may sue its insured for unpaid premiums. See Sandwich Chef of Texas, Inc. v. Reliance National Indemnity Insurance Co., 202 F.R.D. 212 (S.D. Tex. 2001, no pet.); Dolenz v. Employers Casualty Co., 504 S.W.2d 625 (Tex.Civ.App.-Fort Worth 1974, no writ). However, the only applicable case law treats cooperation clauses as conditions precedent, relieving an insurer of liability rather than creating an affirmative cause of action against its insured. Furthermore, Plaintiff's own policy lists the cooperation clause in a section entitled "Commercial General Liability Conditions." Under these circumstances, the Court concludes that such a breach does not create an affirmative cause of action and that Plaintiff's contract theory does not state a claim upon which relief can be granted.
See also e.g., Filley v. Ohio Casualty Ins. Co., 805 S.W.2d 844, 847 (Tex.App.-Corpus Christi 1991, writ denied) ("The policy requirement that the insured immediately forward every demand, notice, summons or other process of a claim or suit being brought against it is a condition precedent to an insurer's liability."); Employers Liab. Assurance Corp. v. Mosely, 460 S.W.2d 201, 203 (Tex.Civ.App. — Houston [14th Dist.] 1970, no writ) (discussing defense of noncooperation in the posture of a summary judgment motion); Frazier v. Glens Falls Indem. Co., 278 S.W.2d 388, 392 (Tex.Civ.App.-Fort Worth 1955, writ ref'd n.r.e.) (noting that an insured can breach a cooperation clause not only by failing to perform affirmative duties, but also by engaging in negative acts, e.g., failing to refrain from fraudulent or collusive acts).
See cases cited supra note 4.
II. Declaratory Judgment Action
Because Plaintiff's breach of contract action will be dismissed, Plaintiff's action is now one solely for declaratory relief. The Court thus applies the Brillhart / Wilton discretionary analysis to determine whether it should exercise its jurisdiction to hear Plaintiff's declaratory judgment action.
In determining whether to exercise jurisdiction under Wilton, the Court is to consider six nonexclusive factors: (1) whether there is a pending state action in which all matters in controversy may be fully litigated; (2) whether Plaintiff filed suit in anticipation of a lawsuit filed by Defendant; (3) whether Plaintiff engaged in forum shopping in bringing the suit; (4) whether possible inequities in allowing Plaintiff to gain precedence in time or to change forums exist; (5) whether the federal court is a convenient forum for the parties and witnesses; and (6) whether retaining the lawsuit in federal court would serve the purposes of judicial economy. Brietling USA, Inc. v. Porter, No. CIV.A. 301CV2331P, 2002 WL 1286148, at *6 (N.D. Tex. June 6, 2002).
A. Full Litigation in Texas Action
With respect to the first factor, the Texas Action has little similarity to the present action. It was initially a suit against two of Defendants' other insurers for breaches of policies that cover various nursing home lawsuits throughout Texas." It is unclear whether Plaintiff is being sued only for breach of the Policy in the underlying lawsuit, or whether Defendants are claiming that Plaintiff has breached other insurance contracts as well. Defendants' allegations against the two other defendants in the Texas Action are similar: neither of them denied coverage or issued a reservation of rights letter in response to Defendants' request for coverage, but it appears that ultimately neither defended Defendants. But Plaintiff did both: it informed Defendant of its reservation of rights, and it provided a defense. Therefore, Defendants' claims against the original defendants in the Texas Action have little in common with its claims against Plaintiff.
Defendants contend that the Texas Action is fully capable of resolving the matters in controversy because the matters raised by Plaintiff in its declaratory judgment action can just as easily be asserted as defenses or counterclaims in the Texas Action. While that may be true, the lack of a substantial relationship between the claims asserted in the Texas Action and the relatively simple question presented to the Court in Plaintiff's declaratory judgment action weigh in favor of exercising jurisdiction in this case.
B. Anticipation of Litigation / Forum Shopping
Defendants point to several factors indicating that Plaintiff filed the present action in anticipation of litigation by Defendants and as a method of forum shopping. First, Defendants maintain that Plaintiff's first notice of its denial of coverage for the entirety of the verdict was its filing of the present action. The Court finds this argument unpersuasive. Defendants were well aware, pursuant to the reservation of rights letter, that the defense provided by Plaintiff was qualified. Plaintiff explained that many of the claims in the underlying lawsuit were not covered under the Policy, and that the Policy contained terms and conditions that might ultimately relieve Plaintiff of an obligation to indemnify Defendants from all or part of any judgment. Defendants never objected to this qualified defense. It is disingenuous for Defendants to now claim that the filing of this action was in anticipation of Defendants' own state action. Defendants never threatened to add Plaintiff to the Texas Action prior to Plaintiff's filing of this action, nor did Plaintiff have any indication that Defendants intended to sue Plaintiff. Plaintiff had no reason to institute this action until the verdict was rendered in the underlying lawsuit. It was only then that Plaintiff had a coverage defense as a result of the jury's finding of malice.
Defendants also contend that it is too late for Plaintiff to seek declaratory relief because the relations and legal rights between the parties are already "fixed," since Plaintiff is already in breach due to its partial denial of coverage. It is settled that a declaratory judgment action is "intended to provide a means of settling a controversy before it ripens into a violation of the civil or criminal law, or a breach of a contractual duty." Rowan Cos. v. Griffin, 876 F.2d 26, 28 (5th Cir. 1989) (emphasis added). However, the Court rejects Defendants' position that the parties' relations and rights are now "fixed." Under Texas law, an insurer may defend its insured subject to a reservation of rights if the insurer believes in good faith that the underlying lawsuit may not be covered by the insurance policy. Certain Underwriters at Lloyd's London v. A D Interests, Inc., 197 F. Supp.2d 741, 745 (S.D. Tex. 2002). In that situation, the reservation of rights letter is not a breach of the duty to defend; rather, it is notice of the insurer's intent to reserve its rights. Id. Even at the time this motion was filed, Plaintiff was still providing Defendants with a defense in the underlying lawsuit subject to a reservation of its rights. Defendants accepted that qualified defense, and it is inaccurate to now say that the parties' positions are "fixed," so that declaratory relief may not be pursued.
Finally, Defendants contend that forum shopping is apparent in the fact that Plaintiff instigated this action before a judgment was entered on the jury's verdict in the underlying lawsuit. Defendants analogize this situation to that in Wilton, where the court found evidence of forum shopping. The Court disagrees. First, the fact that Plaintiff filed this action prior to the entry of judgment upon the verdict in the underlying suit is not dispositive. The jury verdict finding malice was returned on April 15, 2002, and final judgment was entered on August 15, 2002. Plaintiff filed this action on June 19, 2002, a reasonable time after learning of the jury's finding of malice. Further, the analogy to Wilton is not compelling. Although the insurer in Wilton brought a declaratory judgment action prior to the entry of judgment in the underlying suit, it did so after receiving notice of its insured's parallel state court action. Wilton, 515 U.S. at 277. In this case, there is no evidence that Plaintiff had notice of Defendants' intention to add Plaintiff to the Texas Action before it filed this suit. For these reasons, the Court does not conclude that Plaintiff filed the present suit as a means of forum shopping. Although there is no direct evidence of such, Plaintiff may have logically anticipated litigation, but not to the degree that this Court should decline to exercise jurisdiction. Therefore, the third factor weighs in favor of exercising jurisdiction.
C. Inequities
Defendants claim that Plaintiff filed suit in anticipation of litigation and as a means of forum shopping so that it would be inequitable to reward such conduct by allowing Plaintiff its choice of forum. However, the Court has already rejected the proposition that Plaintiff's actions in such regard should cause the Court to decline to exercise its jurisdiction. Defendants also maintain that the exercise of this Court's jurisdiction would be inequitable because the Defendants are the true plaintiffs. However, that argument would suggest that in every declaratory judgment action seeking a determination of no coverage, it would be inequitable to proceed. The Court disagrees. The fact that Plaintiff filed its declaratory judgment action in federal court before Defendants acted does not create an inequity to be remedied by the Court's rejection of this case. The fourth factor weighs in favor of exercising jurisdiction.
D. Convenience of Forum
Defendants' principal place of business is in Gregg County, Texas, where the Texas Action is pending. Defendants maintain that because the parties' contractual relationship is centered in Gregg County, litigating there would be more convenient than litigating in Dallas County. Plaintiff responds that litigating in Dallas County would be equally convenient for Defendants because: (1) the underlying lawsuit is pending in Dallas County; (2) Defendants operate at least four nursing homes in Dallas County; (3) Defendants' county of residence is only a few hours away from Dallas County; and (4) Defendants retain Dallas counsel.
Under Texas law, the construction of an insurance contract is a question of law. Heritage Resources v. NationsBank, 939 S.W.2d 118, 121 (Tex. 1996). The facts that the contractual relations are centered in Gregg County and that the underlying lawsuit is in Dallas County are therefore largely irrelevant. Plaintiff argues that it will be at least as inconvenient for it to litigate in Gregg County as it will be for Defendants to litigate in Dallas County. Because Plaintiff's request for declaratory judgment involves a pure question of law, and because either county will be equally inconvenient for the party that opposes suit there, this factor is neutral.
E. Judicial Economy
Defendants argue that because Plaintiff's claims can be asserted as defenses or counterclaims in the Texas Action, this Court's exercise of jurisdiction in the present case would result in duplicative proceedings, thereby wasting judicial resources. Plaintiff disputes Defendants' characterization of the present action as duplicative, and maintains that it was Defendants' joinder of Plaintiff to the Texas Action that created duplicative proceedings. Plaintiff contends that Defendants are motivated by a desire to delay a speedy judicial declaration of the Policy terms.
Plaintiff was within its rights in requesting declaratory relief with respect to the Policy coverage. A D Interests, 197 F. Supp.2d at 745. Defendants had an equal opportunity to request similar relief in state court. The fact that Plaintiff acted first entitles Plaintiff to its choice of forum. The Texas Action involves claims against multiple defendants unrelated to the underlying lawsuit. Conversely, the present case presents a relatively simple question of contract construction, which can be decided on motions for summary judgment. On these facts, there is no reason why Plaintiff should have to await the resolution of unrelated issues in state court to have this question resolved. The last abstention factor weighs in favor of the exercise of jurisdiction.
Under the Brillhart / Wilton analysis, five of the six factors weigh in favor of the Court's exercising its discretionary jurisdiction in this case, and one factor is neutral. Therefore, the Court determines to retain jurisdiction of Plaintiff's declaratory judgment action.
CONCLUSION
For the reasons stated herein, since the breach of contract cause of action in Plaintiff's Amended Complaint fails to state a claim upon which relief can be granted, it is DISMISSED. All other relief requested in Defendants' Motion to Dismiss and/or Stay is DENIED.